Order 745 Revisited, Upheld

In their April 2016 issue, Natural Gas & Electricity welcomes West Monroe's Paul DeCotis as a columnist on Electricity Matters.

Federal Energy Regulatory Commission (FERC) Order 745, Demand Response Compensation in Organized Wholesale Energy Markets, issued March 15, 2011, amended FERC regulations under the Federal Power Act. The order was to ensure that when demand-response resources are made available as an alternative to generation resources, they be paid the same prevailing locational marginal price (LMP).

Compensating demand-response resources in this way helps balance markets and removes barriers to the participation of demand-response resources in wholesale electricity markets. In theory, electricity customers would be indifferent as to whether market supply and demand balanced by generators or reduced demand. Simply speaking, then, logic follows that both resource types should be valued and compensated the same.

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